Tempur-Pedic Shares Set to Hit ‘Snooze’

by Tim Biggam | February 6, 2012 7:15 am

While the overall market has been on a resounding bull run of late, some stocks have been vastly outpacing these heady gains. One of these stocks is Tempur-Pedic International (NYSE:TPX[1]), which has lifted from $52.50 to $71 this year, or a 35% gain over the past month.

Although this manufacturer and distributor of mattresses and pillows (which operates in approximately 80 countries worldwide) did have a small beat on earnings, the stock price would imply that it crushed expectations.

With expectations of $3.85 per share for 2012, the forward multiple is at nearly 18.5, well above its five-year average of 16.27. Other sentiment indicators, such as its nine-day Relative Strength Index (RSI) levels, are extremely overbought.

Putting a more-reasonable multiple of 17 on the shares places the stock at $65, which is our price target for June expiration.

Based on TPX’s current market price of $71.13 and using a target price of $65, a target date of June 15, 2012, and $1,000 of investment capital, you can capture some nice gains by selling a June 70-75 call spread, buying a June 75-65 put spread or using another options strategy that best fits your trading style and goals.

For the full details on this trade, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.

Create your free login, and get access to the details about these TPX options trading strategies by visiting the TradeBuilder here[2].

  1. TPX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TPX
  2. get access to the details about these TPX options trading strategies by visiting the TradeBuilder here: https://www.tradingblock.com/Find/TBr/TradeBuilder.aspx?Symbol=TPX&TargetDate=20120615&Price=65.00&Amount=1000

Source URL: https://investorplace.com/2012/02/tempur-pedic-shares-hit-the-snooze-button-tpx/
Short URL: http://invstplc.com/1nCBWPv